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American fashion giant Forever 21 files for bankruptcy protection as it struggles to maintain its operations.
The clothing chain, known for its affordable and fashionable products, announced the decision on its official website in late September.
The company has been having difficulty to keep pace with the rapid growth of e-commerce and change in consumer demands, causing its sales to suffer. Recently, Forever 21’s target market, which is dominated by teenagers and millennials, started to turn to online shopping.
Additionally, many consumers are becoming conscious of the materials used in the products they purchase, preferring brands that do not harm the environment. According to a retail research firm founder, Forever 21’s brand does not particularly stand for that advocacy.
These challenges dealt a serious blow to Forever 21, which owns roughly 800 large brick-and-mortar stores worldwide. Based on court documents, the company can no longer afford its rent amounting to $450 million a year.
The brand revealed plans to close as many as 178 of its US stores. Most of its international operations will also gradually come to an end, especially in Asia and Europe. Despite this, business will continue as usual for its branches in Latin America and Mexico.
The company says the bankruptcy filing is necessary for the future of the business. While under bankruptcy protection, the company’s debts are frozen. The business also obtained $275 million from its lender JP Morgan Chase and $75 million from global finance and investment firm TPG Sixth Street Partners. With a sum of $350 million from financers, the firm can continue its operations and have the chance to become profitable again.